Magazine

Soft Focus

June 29, 2003

Linus Torvalds, the father of the Linux operating system, has a new job. He's leaving chipmaker Transmeta (TMTA) to join the Open Source Development Lab, a Linux think tank backed by IBM (IBM), Intel, and others.

Now, Torvalds can spend all of his time on Linux. "There has been some stress to have to juggle the two" worlds of Transmeta and Linux, he says. This summer, he plans to release a new version of Linux for powerful server computers.

Just one day into his new gig, though, he was beset by legal issues. SCO Group (SCOX) a Lindon (Utah) company that claims rights to the Unix operating system, asserted in a June 17 court filing that Torvalds does not respect intellectual property rights. The filing came as part of SCO's suit charging IBM with improperly contributing some of SCO's software code to Linux. Torvalds confirms that he doesn't believe programmers should spend time looking up patents, but says he respects intellectual property. His take on SCO's suit: "It looks more like FUD (fear, uncertainty, and doubt) than a real case." Two american icons are wrestling with whistleblowers over their accounting practices. On June 17, Coca-Cola (KO) revealed that the Securities & Exchange Commission had opened an informal inquiry into allegations made by an ex-Coke employee that the soda giant used improper bookkeeping at its fountain business. Coke said it would take a $9 million writedown of some fountain-dispensing assets after its board launched an independent review of the whistleblower's charges. But Coke said no evidence was found to support allegations that as much as $2 billion in marketing allowances had been improperly accounted for.

Separately, two former employees of Levi Strauss filed additional evidence to support their lawsuit claiming they were wrongly fired in late 2002 after disagreeing with their supervisor over tax and accounting strategies. Levi's denied wrongdoing. Just when the cable industry thought it might be out from the shadow of accounting scandals, Cablevision Systems (CVC) said on June 18 that it had terminated the president of its American Movie Classics division and 13 other employees for allegedly improperly accelerating the accrual of expenses and fabricating invoices. A five-month review by company and outside auditors alleged that, between 1999 and 2002, about $18 million in expenses was improperly accrued a year ahead of schedule, helping to boost earnings in the upcoming year. It said it did not plan to restate financial results. Cablevision has hired former SEC enforcement chief William McLucas to investigate further. AMC's dismissed president, Kate McEnroe, and other executives, could not be reached for comment. Microsoft opened a new front in the war against spam on June 17. The world's No. 1 software maker filed 15 lawsuits in the U.S. and Britain to stifle spammers. Microsoft says it blocks 2.4 billion messages each day addressed to its MSN and Hotmail customers. Relying on recent antispam legislation, Microsoft is seeking to enjoin spammers from sending unsolicited mail. It also wants to collect unspecified monetary damages "so that there is some real pain in people's pocketbooks when they are engaging in this kind of illegal activity," according to Bradford Smith, Microsoft general counsel. Wal-Mart stores (WMT) and the United Food & Commercial Workers (UFCW) might soon find themselves at the bargaining table. A National Labor Relations Board administrative law judge ruled that the retailer should have bargained with the UFCW in 2000 when it decided to eliminate meat-cutting jobs. The change came soon after meat-cutters in Jacksonville, Tex., voted for union representation. Wal-Mart says that the order to bargain is limited only to the effects of implementing its "case-ready" meat program and that it will appeal. Ever since former Westinghouse CEO Michael Jordan came out of retirement in March to become CEO of Electronic Data Systems (EDS) uncertainty has ruled the day. On June 18, investors finally got a glimpse into the tech outsourcing giant's future. To cut costs and bolster its finances, EDS will lay off 2,700 workers, move more operations offshore, and sell off $250 million in noncore assets. But clouds remain. The SEC has widened an investigation into the company's September earnings shortfall, and a change in accounting rules could force a financial restatement. -- Kmart (KMRT) reported a narrower loss in the first quarter after emerging from bankruptcy.

-- Medical-device maker Guidant (GDT) said it would shutter its Endovascular unit.

Eastman Kodak (EK) shares sank 10% on June 18, to $28.77, after the company slashed its forecast for second-quarter operating earnings. CEO Daniel Carp blamed the SARS outbreak, which has hurt Asian film sales. But with digital photography taking off, film sales are also weak in the U.S. and Europe.